Think About Bigger Pictures
As I often point out,
it is beneficial to review daily charts of the sector indices before picking
individual stocks. If you concentrate too much on selecting individual stocks,
you could fail to see a bigger picture of the market. In general, your stock
will perform better if you choose stocks from the strongest sectors, and stocks
from weak sectors can give you excellent results in short-selling.
The chart below is a daily chart of the Pharmaceutical Index as of the close of
July 23. The index bounced down from its 50-day moving average and closed near
the day’s low. This weak finish suggests a continuation of the downswing and a
possible test of the July 12 low.Â
The next step is to study the daily
chart of each component issue of the Pharmaceutical Index.Â
Index Components
| Abbott Laboratories | ( ABT | Quote | Chart | News | PowerRating) |
Johnson & Johnson | ( JNJ | Quote | Chart | News | PowerRating) |
| ALZA Corporation | ( AZA | Quote | Chart | News | PowerRating) |
King Pharmaceuticals, Inc. | ( KG | Quote | Chart | News | PowerRating) |
| American Home Products Corporation |
( AHP | Quote | Chart | News | PowerRating) |
Lilly (Eli) & Company | ( LLY | Quote | Chart | News | PowerRating) |
| Amgen, Inc. | ( AMGN | Quote | Chart | News | PowerRating) |
Merck & Company, Inc. | ( MRK | Quote | Chart | News | PowerRating) |
| AstraZeneca PLC | ( AZN | Quote | Chart | News | PowerRating) |
Pfizer, Inc. | ( PFE | Quote | Chart | News | PowerRating) |
| Bristol-Myers Squibb Company | ( BMY | Quote | Chart | News | PowerRating) |
Pharmacia Corporation | ( PHA | Quote | Chart | News | PowerRating) |
| Forest Laboratories Inc. | ( FRX | Quote | Chart | News | PowerRating) |
Schering-Plough Corporation | ( SGP | Quote | Chart | News | PowerRating) |
| Glaxo Smith Kline Plc | ( GSK | Quote | Chart | News | PowerRating) |
 |  |
After going through all of the
stocks, I believe PFE and AMGN have the best tradable patterns for short
selling. PFE’s daily chart looks almost identical to the index, and AMGN’s daily
chart has a bearish outside bar just above its 20-day moving average.Â
Don’t be obsessed with individual
stocks too much. Think about the sector before picking your stocks. I’m sure it
will improve your overall performance.